Financial organizations will be allowed to interstate information exchange

On the 20th of June the State Duma has passed the bill, approved by the Government of the FR, in its second and third reading, which grants to Russian financial organizations the right to transfer the information on American taxpayers, as well as obliges foreign financial organizations to transfer the information on Russian citizens to Federal Tax Service of the RF.

New rules are focused on the creation of legal conditions for information exchange between Russian and foreign financial organizations and tax authorities.

In some extent such normative acts are of revolutionary nature, because the necessity of disclosure of financial information about residents abroad is long overdue. So that, since the 1st of July the American Law «Foreign Account Tax Comliance Act» (FATCA) comes into effect. It demands from foreign banks to provide information on accounts of American clients to the Internal Revenue Service of the USA. From those banks, which are not ready to comply with the demand, the bank counterparties in the USA will be obliged to withhold taxes at the rate of 30% for a number of payments, including the income from investments.

At the same time our law-maker has included some sufficient clauses:

financial organizations are granted with the right to transfer the information on foreign taxpayers to foreign fiscal bodies
only by gaining approval from the client;
force of the bill in case of its passage won’t be extend to citizens of the RF and legal entities, established under the Russian law,
which have more than 90% of shares of the authorized capital directly or indirectly controlled by the RF or citizens of the RF;
Rosfinmonitoring (the Federal Financial Monitoring Service) has the right to forbid the transfer of requested information
to a foreign tax authority.

In total, it can be observed the liberalization of legal relations in the sphere of interstate exchange of fiscal information, what, finally, will increase the transparency of transactions with foreign counterparties.

Has the capital outflow in Russia cooled down?

Ukrainian events exert an immediate influence on macroeconomic situation in Russia.  In the first quarter of 2014 the tangible pressure was placed on rouble and stock market. The capital outflow fastened under the threat of sanctions on the part of Western governments. 

However, both internal and external investors start recovering their temper gradually and appraising the existing state of affairs less emotional. According to Maksim Oreshkin, director of Long-range Strategic Planning Department of the Ministry of Finance, the capital outflow in April was around USD 4,6 billion, that is much less than the indicator documented a month earlier. Market stabilization will lead to trend reversal and rate diminution of capital export. 

Earlier Elvira Nabiullina, the Head of the Bank of Russia, indicated the key sources and reasons for the capital outflow. Within the first quarter of 2014 this indicator reached the level of USD 63 billion, two-thirds of which are accounted for by internal conversion and purchase of currency in cash by citizens and companies. This was related to increased uncertainty, caused by high rouble rate volatility and sharpening of geopolitical environment. Nabiullina brought into focus the fact that the remained third of the capital outflow is comparable with similar indicator of the first quarter of 2013. 

On the whole, following the results of the current year, the Ministry of Economic Development and Trade predicts the capital outflow from Russia at the level of USD 90 billion. The similar estimate (USD 85 - 90 billion) is given by the Head of the Central Bank of Russia. As a comparison, in 2013 the capital outflow in Russia made USD 59,7 billion, in 2012 – USD 53,9 billion.

In this respect, the financial authorities feel quite optimistic about the future and if the situation will be stable, significant slowdown of cash outflow is expected in II, III and IV quarters.